In a historic development, India and the European Union (EU) signed the Free Trade Agreement, which gives a huge trading impetus to India by opening up preferential entry to over 99% of Indian exports into the EU.
Amongst other things, India will reduce the prevailing high tariffs on automobiles manufactured in the EU, making the domestic markets accessible to the companies and duties on alcohols and spirits will be reduced or eliminated in the near future, making it a win-win for both blocks.
Abinash Verma, Ethanol Expert, ex-bureaucrat, Former DG ISMA and Promoter Shareholder of Grain-based ethanol plant, told ChiniMandi that ethanol should be included in the EU’s zero-duty import list. This would help absorb excess ethanol production and create a steady market for producers.
Q. Why should India prioritise ethanol export in the India–EU FTA negotiations, and what strategic advantages does zero-duty access offer?
A. Thanks to very encouraging policies of the Government of India, as also several State Governments, investors have responded very well, and over the last 3-4 years, new ethanol production capacities of around 12-13 billion litres have been set up. This has resulted in surplus production of alcohol/ethanol. The demand side growth has not kept pace, and till such time flex fuel vehicles get rolled out in India, we have to find ways to create extra demand to consume the ethanol being produced.
The EU encourages ethanol blending with petrol for environmental reasons. With souring relationships between the US and EU, the time is ripe for India to push for the export of ethanol to the EU.
Import duty on denatured ethanol is around 102 Euros per KL and 192 Euros per KL for undenatured ethanol (converts to Rs.11 and Rs.20.90 per litre of ethanol). Under FTA, India will be able to export duty-free to the EU and, accordingly, become competitive.
Q. The EU already imports ethanol from the US, Brazil, and Pakistan. What makes India a competitive and reliable supplier?
A. The duty-free imports under FTA, which will not be available for the US and Pakistan, will help make Indian ethanol competitive in the EU. Also, with large ethanol production capacities already set up and being set up in India, we can be regular and reliable suppliers of ethanol to the EU on a long-term basis. We have enough raw material in the form of maize, damaged foodgrains and sugarcane to be able to do so.
Q. Can ethanol exports to the EU create a stabilising effect on India’s surplus ethanol management?
A. Some of the surplus ethanol can be absorbed in the EU, if India is able to export ethanol duty-free under FTA to the EU. However, the Government of India will have to very quickly allow 1G ethanol exports (1G= first generation made from grains and sugarcane), as currently only 2G ethanol is allowed to be exported from India.
